Sunday 6 March 2011 16.07 EST
First published on Sunday 6 March 2011 16.07 EST

The sight of Prince Andrew with his arm around the bare waist of a 17-year-old masseuse at the centre of a US sex scandal has transformed royal embarrassment over tainted foreign regimes into a political firestorm.

As no stranger to controversy, the Duke of York's role as UK special representative for international trade and investment has already earned him bitter criticism over his supposedly close relationships with the ruling families of Tunisia, Libya and Kazakhstan.

But his friendship with Ghislaine Maxwell, daughter of the disgraced former newspaper owner, and the convicted American financier Jeffrey Epstein has spun off into a volatile tale of erotic massage and the procuring of underage girls into prostitution.

Epstein has been convicted of soliciting teenage girls for prostitution. Despite that, the Duke of York was photographed in New York with Epstein last December.

And it was the admission this weekend that the Prince had received a massage while staying at Epstein's Florida mansion 10 years ago – although it did not involve sexual contact – that has apparently proved too much for the government.

The lukewarm reassurance offered by the foreign secretary, William Hague, in the wake of the revelation epitomised the government's desire to keep the prince at arm's length while avoiding a constitutional clash that might damage relations with the royal family.

Speaking on the BBC's Politics Show, Hague said: "I've seen a lot of benefits that [Prince Andrew] has brought in in countries that I have visited where he's been performing that role. I'm not an expert on … [any of his] embarrassments, I haven't had time, with everything going on in the Middle East, to look at those things. But certainly I've seen around the world a lot of good that he has done for this country."

Although that may be the public message, in private other government figures believe that this recent escalating series of embarrassments leaves no other choice but to engineer a deliberate lowering of the prince's profile.

The duke's precarious position was highlighted in the email sent in error by Buckingham Palace to another newspaper late on Friday. It had been intended for a royal official and suggested seeking public support from UK Trade and Investment (UKTI), the export-promoting body with which Prince Andrew works.

A Buckingham Place spokesman dismissed suggestions that he might give up his position, saying: "The duke is fully committed to his role as special representative and it's understood the government supports him in this role."

The anti-monarchy campaign group Republic has called for Prince Andrew's removal, claiming that "continued speculation about the duke's friendships, business interests and professional conduct risks bringing UKTI, the Department for Business and the Foreign Office into disrepute."

But government sources suggested it would be difficult to remove Prince Andrew unilaterally from his role representing British industry abroad even though the taxpayer has picked up a multimillion-pound bill for the duke's jet-setting.

The terms of Prince Andrew's engagement as special representative have not been formalised since the role was created 30 years ago. The job was held for 20 years by the Duke of Kent.

A spokesman for UKTI insisted there was no question of the prince ending his role, which includes working for the Foreign Office and Business Department. His involvement is valued widely in the business community and a glance at the court circular shows a busy schedule of trade-related meetings down the years.

"We have absolute confidence in his role supporting British industry abroad and we don't see him as isolated," a UKTI spokesman said. "Any decision in the future will be a discussion between the palace and the government. Sacking would never be the case. Any discussion would be between the government and the palace as it was when the role was created."

Asked how the prince works with ministers, the spokesman said: "Clearly he consults government on a regular basis. Part of his role is keeping government aware of his visits. It his decision what he does, but with regular consultation with government."

Chris Bryant, the former Labour Foreign Office minister, called on the prince to stand down and the government to clarify the roles and responsibilities of the position. Bryant said that when he was minister, on more than one occasion he discovered only after the visit had taken place that Prince Andrew had been to a country which came under his ministerial responsibility.

"It's a classic British fudge. It needs root and branch reform to formalise it. We need someone to do that role, but we need greater government control and openness and transparency about what they do – and it shouldn't be him doing it," Bryant said.